Bipartisan group of senators calls for ethanol subsidies to expire

By
Greg Sargent

In a clear sign of momentum against ethanol subsidies, a bipartisan group of more than a dozen senators has signed onto a letter urging Senate leaders to let the subsidies expire during this Congress, a move that could put many officials in a tricky political spot and could even have ramifications for the 2012 presidential race.

The letter, which I obtained from a source, was authored by senators Dianne Feinstein and Jon Kyl, and includes a number of Democrats and Republicans, including John McCain, Susan Collins, Richard Burr, and Mike Enzi. This is key, because the question of whether the subsidies should expire is emerging as a key test -- just like earmarks -- of whether Republicans are serious about reining in spending and the deficit.

While this issue could divide Dems along regional lines, it's more directly revelant to the GOP. With leading GOP senators now coming out for letting the subsidies expire, this could up the pressure on Republican senators who backed the subsidies in the past, such as Chuck Grassley and Orrin Hatch, putting them on the wrong side of what may emerge as a key litmus test for the Tea Party and potentially dividing the GOP caucus.

The letter forcefully calls on senators Reid and McConnell to do away with the subsidies this year:

We are writing to make you aware that we do not support an extension of either the 54 cent-per-gallon tariff on ethanol imports or the 45 cent-per-gallon subsidy for blending ethanol into gasoline. These provisions are fiscally irresponsible and environmentally unwise, and their extension would make our country more dependent on foreign oil.

Subsidizing blending ethanol into gasoline is fiscally indefensible. If the current subsidy is extended for five years, the Federal Treasury would pay oil companies at least $31 billion to use 69 billion gallons of corn ethanol that the Federal Renewable Fuels Standard already requires them to use. We cannot afford to pay industry for following the law....

Eliminating or reducing ethanol subsidies and trade barriers are important steps we can take to reduce the budget deficit, improve the environment, and lessen our reliance on foreign oil. We look forward to working with you on responsible energy tax policy.

This comes after senators Jim DeMint and Tom Coburn told me recently that they were calling on GOP colleagues to support eliminating the subsidies. The issue could also create complications for GOP presidential candidates, who may be forced to choose between catering to key 2012 states by supporting continued subsidies, or winning over the Tea Party by opposing them.

Greg, you know, right, that a post on ethanol isn't going to get much traffic unless you maybe include Sarah Palin's opinion in the headline?--e.g., Palin responds as Bipartisan group of Senators . . .

P.S. I do hope that Grassley counters by also eliminating the oil & gas subsidies to level the playing field. Perhaps someone can also get the sugar ones included so we can get rid of high fructose corn syrup and start having real Coca Cola made in the U.S. again instead of having to import it from Mexico.

"Perhaps the money saved here could pay for extended unemployment benefits, since that's the only issue holding them up."

Excellent idea. This was what Republican Senator Jim Bunning wanted to do originally with his vote to offset the unemployment benefits with ending an environmentally destructive tax subsidy for paper companies.

It's interesting to note the difference in political approaches here. Senator Bunning was willing to stand alone, be vilified in the press, and ultimately lose the vote on his amendment in order to make his point that the spending should be paid for. Despite losing the battle(s), it appears that as time has gone on more people have come around to his point of view on things.

Meanwhile, Obama and the Democrats don't ever seem to want to take a chance on losing a vote on something they believe in to make a point, i.e. not renewing the tax cuts for couples making more than $250,000 per year.

Note also that certain principled Democrats such as Russ Feingold also supported paying for unemployment benefit extensions with offsets.

As much as the conservative loving Corporate Media and Villager clowns likes to pretend otherwise, fact is, Republicans don't give a damn about the deficit. They grow them, while Democratic administrations shrink them. That's the objective and provable reality, no matter what anyone else might think.

However, the Teabagger goons have imposed a new level of party discipline on Republicans. Witness Kay Bailey Hutchison and Olympia Snowe signing on to the Senate GOP's unilateral ban on earmarks. They refused to sign on just a few months ago, but both are slated to face teabagger challenges, and think that these late-minute flip flops will protect them. It won't, they are both goners, but they'll try and pretend otherwise for as long as they can until they realize that their best chances for reelection are to go independent.

Democrats will fall along regional lines on the matter, like they always do. Wasteful spending in Iowa won't seem so wasteful to Iowa's Democratic congressional delegation. And in normal times, the same would apply to the region's Republicans.

But these aren't normal times, with the teabaggers demanding that Republicans pay more than lip service to deficit reduction. And there's no doubt that these subsidies aren't just wasteful, but they're unsound on any possible policy grounds. Subsidizing Big Oil and Big Agribusiness for environmentally unsound ethanol subsidies is madness, and has only persisted as long as it has because of Iowa's presidential clout.

And in a presidential cycle where Republicans will be tripping over themselves to curry favor with the Teabaggers and with Iowans ... well, this topic should prove entertaining to say the least.

Unless I'm mistaken, letting the subsidy expire would have the effect of passing on the cost of federally mandated use of Ethanol to the drivers.

Federal law mandates the use of Ethanol. But Ethanol is so expensive to produce and blend with gasoline, that the government eased the certainty of "sticker shock" at the gas pump by subsidizing Ethanol behind the curtain where the political sausage is made.

So, as I read the article, the 45 cent per gallon subsidy goes a way, but the mandate to use Ethanol stays. Who, then, picks up the 45 cents per gallon costs that Ethanol adds to gasoline?

My guess is that about 30 seconds after the subsidies expire, the price of gas at the pump will increase 45 cents a gallon.

Can you guess who will be hurt the most?

The only way to avoid that increase at the pump would be to remove the mandate to use Ethanol. That's the right answer because like global warming, Ethanol is a hoax.

But eliminating Ethanol would also eliminate the politically correct Ethanol industry in a blink of an eye, because Ethanol has no value added to justify the increased cost to gasoline.

Ethanol helps farmers, but that's about it, but it has nothing to do with a rational energy policy.

That's the problem with subsidies. By definition, they are payments to individuals and companies to keep them in business when they would otherwise fail in a free competitive market. Subsidies are the government's way of rewarding failure in order to impose politically correct social engineering experiments or to protect politically important votes. They have nothing to do with improving the lives the people who pay the subsidies--the American taxpayers.

The subsidies should be eliminated, but so too should the mandate to use Ethanol. If Ethanol was so good, there would be a natural demand for it. Beware when the government forces you to use a product when there is no demand for it.

Personally, I don't want to pay more for gas when the added costs provides zero benefit to me, the country, or the environment.

Ethanol does not decrease our dependence on foreign energy, because it takes more energy to produce than it delivers in the gas tank. Those who say otherwise are leaving out the costs to grow the corn, the requirement to transport Ethanol by truck instead of pipelines, and other factors typically omitted to make Ethanol appear less costly than it actually is. Include all the direct and indirect costs and you will see that Ethanol does a lot of harm without tangible benefits of any note.

If Ethanol was a good idea, private investors would have brought it to consumers long ago and made a profit.

If they are going to remove the subsidies they better also eliminate the blending mandate. Let the free market create competition between companes that want to use the blended fuel and those that do not. Let them compete.

We encourage users to analyze, comment on and even challenge washingtonpost.com's articles, blogs, reviews and multimedia features.

User reviews and comments that include profanity or personal attacks or other inappropriate comments or material will be removed from the site. Additionally, entries that are unsigned or contain "signatures" by someone other than the actual author will be removed. Finally, we will take steps to block users who violate any of our posting standards, terms of use or privacy policies or any other policies governing this site. Please review the full rules governing commentaries and discussions.